The rupee, on Wednesday, gained 27 paise to close at 67.68 against the US currency on dollar selling by banks and exporters amid firm stock markets.
The US dollar was weak against the major world currencies in overseas markets which also strengthened the rupee sentiment, dealers said.
The rupee opened higher 67.78 per dollar against previous closing level of 67.95 per dollar at the Inter-bank Foreign Exchange (Forex) and hovered in a range of 67.6050 per dollar and 67.85 per dollar in day trade.
It finally settled at 67.68 per dollar, showing a gain of 27 paise or 0.40 per cent.
The dollar index was trading down 0.25 per cent against a basket of six currencies in the late afternoon trade.
The RBI fixed the reference rate for the dollar at 67.7443 and for the euro at 75.0200.
In cross-currency trades, the rupee dropped further against the pound sterling to finish at 90.90 from 90.76 yesterday and but recovered against the euro to settle at 74.96 from 75.32.
The domestic currency also moved up further against the Japanese yen to 65.97 per 100 yen from 66.40 on Tuesday.
Pramit Brahmbhatt of Veracity Financial Services said, "Rupee opened stronger following cues from global equity market. Domestic equity market opening and positive cues from the same added fuel to rupee rally."
"Trading range for the spot USD/INR pair will be 68 to 67.50/USD," he added.
The benchmark BSE Sensex rose further by 215.84 points or 0.81 per cent to close at 26,740.
At overseas, the pound and the euro hovered above their post-Brexit lows as worries over the impact of the Brexit vote receded.
In forward market, premium for dollars showed a narrowly mixed trend due to uneven demand and supply transactions.
The benchmark six-month premium for November eased to 174-176 paise from 175-176 paise yesterday while far forward May 2017 contract inched up to 369-371 paise from 368.75-369.50 paise.
Meanwhile, world oil prices rebounded in Asia today on bargain hunting but tremors from Britain's shock vote last week to leave the European Union continue to weigh on sentiment.
